Dollar Losing Reserve Status?
We have been watching Ben Bernanke juggle the fiery pins of zero interest rate, monetizing the debt, and running the printing presses 24/7 for well over a year now, and we have been listening to the Russians and Chinese call for a new world reserve currency for months. It is not official yet, but it appears that our dollar is about to be booted from the table. I personally believe that the title of this article from the NY Post is misleading, but the information that it contains shows the trend, and I am looking for corraboration in other sources.
Ben Bernanke‘s dollar crisis went into a wider mode yesterday as the greenback was shockingly upstaged by the euro and yen, both of which can lay claim to the world title as the currency favored by central banks as their reserve currency.
Over the last three months, banks put 63 percent of their new cash into euros and yen — not the greenbacks — a nearly complete reversal of the dollar’s onetime dominance for reserves, according to Barclays Capital. The dollar’s share of new cash in the central banks was down to 37 percent — compared with two-thirds a decade ago. (emphasis mine)
Currently, dollars account for about 62 percent of the currency reserve at central banks — the lowest on record, said the International Monetary Fund.
Bernanke could go down in economic history as the man who killed the greenback on the operating table.
After printing up trillions of new dollars and new bonds to stimulate the US economy, the Federal Reserve chief is now boxed into a corner battling two separate monsters that could devour the economy — ravenous inflation on one hand, and a perilous recession on the other.
“He’s in a crisis worse than the meltdown ever was,” said Peter Schiff, president of Euro Pacific Capital. “I fear that he could be the Fed chairman who brought down the whole thing.”
Investors and central banks are snubbing dollars because the greenback is kept too weak by zero interest rates and a flood of greenbacks in the global economy.
They grumble that they’ve loaned the US record amounts to cover its mounting debt, but are getting paid back by a currency that’s worth 10 percent less in the past three months alone. In a decade, it’s down nearly one-third.
Yesterday, the dollar had a mixed performance, falling slightly against the British pound to $1.5801 from $1.5846 Friday, but rising against the euro to $1.4779 from $1.4709 and against the yen to 89.85 yen from 89.78.
Economists believe the market rebellion against the dollar will spread until Bernanke starts raising interest rates from around zero to the high single digits, and pulls back the flood of currency spewed from US printing presses.
“That’s a cure, but it’s also going to stifle any US economic growth,” said Schiff. “The economy is addicted to the cheap interest and liquidity.”
Economists warn that a jump in rates will clobber stocks and cripple the already stalled housing market.
“Bernanke’s other choice is to keep rates at zero, print even more money and sell more debt, but we’ll see triple-digit inflation that could collapse the economy as we know it.
“The stimulus is what’s toxic — we’re poisoning ourselves and the global economy with it.”
Thomas Palley, economist from New America Foundation believes that the dollar falling is not necessarily a bad event since it will make American goods cheaper to the rest of the world, but I urge you to take everything with a grain of salt. A taste of what New America is after the vid, and ask “who benefits?”
Economist: The dollar is like democracy
Founded 1999, to “bring exceptionally promising new voices and new ideas to the fore of our nation’s public discourse. Relying on a venture capital approach, the Foundation invests in outstanding individuals and policy solutions that transcend the conventional political spectrum.”
Senior Staff as of October 2006: President and CEO Ted Halstead, VP Michael Calabrese, VP Rachel L. White, and many lesser directors on salary.
Board of directors as of October 2006: Eric A. Benhamou (Chair), James Fallows, Francis Fukuyama, Ted Halstead, Noosheen Hashemi, Laurene Powell Jobs, Kati Marton, Walter Russell Mead, Lenny Mendonca, Steven Rattner, Eric Schmidt, Anne-Marie Slaughter, Christine Todd Whitman, Daniel Yergin, Fareed Zakaria.
|Steven C. Clemons||Pundit||1962||Senior Fellow, New America Foundation|
|James Fallows||Journalist||2-Aug-1949||Atlantic Monthly|
|Francis Fukuyama||Author||27-Oct-1952||The End of History and the Last Man|
|Flynt Leverett||Government||6-Mar-1958||Former National Security Council staffer|
|Walter Russell Mead||Author||12-Jun-1952||Special Providence|
|Eric Mindich||Business||1967||Eton Park Capital Management|
|Jim Pinkerton||Pundit||11-Mar-1958||Fox News Watch|
|Diane Ravitch||Government||1-Jul-1938||Education reformer|
|Eric Schmidt||Business||1955||CEO of Google|
|Bernard L. Schwartz||Business||12-Dec-1926||CEO of Loral Corporation, 1972-2006|
|Anne-Marie Slaughter||Government||27-Sep-1958||Director of Policy Planning, State Dept.|
|Laura D. Tyson||Economist||28-Jun-1947||Dean of London Business School|
|Christine Todd Whitman||Government||26-Sep-1946||GWB’s first head of EPA|
|Daniel Yergin||Author||6-Feb-1947||The Prize|
|Fareed Zakaria||Journalist||20-Jan-1965||Newsweek foreign affairs|
The New America Foundation is a non-profit public policy institute and think tank located in Washington, D.C.. It was founded in 1998 by Ted Halstead, Sherle Schwenninger, Michael Lind and Walter Russell Mead.
In 2007 Steve Coll, a former managing editor of The Washington Post, succeeded Ted Halstead as President of the New America Foundation. Well-known board members include political commentator Fareed Zakaria, Christine Todd Whitman, international relations theorist Francis Fukuyama, Atlantic Monthly correspondent James Fallows, former Federal Reserve Vice Chairman Roger Ferguson, and economist Laura D’Andrea Tyson. Google‘s CEO, Eric Schmidt, is chairman-elect of the foundation..